How To Make Money From Granny Flats

Let’s have a look at the numbers of a granny flat investment and how you make money with granny flats in the current market.

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0:00 – Introduction
0:31 – It’s a low cost way to make a solid return on investment
3:17 – It can give you a better rental return
5:56 – The security of two incomes
7:20 – Granny flat income can be used to pay down debt
8:09 – A quick walkthrough of the property

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How much passive income can a granny flat earn?


Ryan 0:00
as ben finishes off his instagram we just want to talk about an idea of how to make money from granny flat so obviously if you follow the channel you’ve seen us talk about this before and seen a bunch of walkthroughs but for those who aren’t familiar we kind of want to talk through the numbers of a granny flat and how people are making money from granny flats in this current market we’re currently in north of brisbane we do this in southeast queensland for clients and so exactly how does it work and how do people make money from granny flats

Ben 0:29
yeah so one of the cool things about a granny flat is it’s a pretty low cost way to make a really solid return on investment so this particular granny flat costs $120,000 roughly for the client plus a little bit of fencing and a path and they’re going to get 300 to 310 bucks a week so as a pure return on investment you’re looking at what 15 to 16% which is really really difficult to go out and replicate you know it’d be kind of like going out and buying a million dollar property and getting 300 bucks a week rent on a three three grand a week wrench on it

Ryan 1:06
this is later in the day inspection so yeah in terms of the numbers you’re looking at build costs of somewhere around $120,000 that can go upwards we have done walkthroughs with clients who have built for you know 130 540,000 to get just a bit high quality fixing fixtures and fittings and finishes and things like that so it can vary and obviously depending on what builder you work with that adjust the price as well pumped on property have special deals because they do volume with builders so clients are able to get cheaper prices there but if you’re looking around the 120 to 140 mark seems to be about where the markets out at least up here in southeast queensland and then obviously depending on your area depends on how much it’s going to rent for here we have behind us a two bedroom granny flat so two and one bedrooms are obviously going to rent differently

Ben 1:58
yeah what i found that on the beaches of brisbane these places rent for slightly more than 300 to 310 a week and then as you get a bit closer to the city you’re kind of looking at somewhere between 280 to two maybe 300 bucks a week so

Ryan 2:11
you know are you saying that actually on the beaches you’re getting more rent for granny flats than in the city yeah because i would have thought that the city in the more expensive suburbs in the city would rent for more

Ben 2:21
yeah it’s crazy man like the granny flats on the beaches where the property prices are still low renting for hire it’s it’s really a bit of a head twist

Ryan 2:29
yeah so obviously that’s going to depend on the market and why it’s really important to do your research before going ahead and building one talking to different rental managers in the area to find out exactly what they think the property is going to rent for there have been interactions with rental managers who

Ben 2:45
think they won’t rent and so just don’t go to one and if they say that to you you know go and speak to another one because ben recently finished a granny flat and had what 26 people through 26 groups through 26 groups through six offers in 310 bucks in the first day that it was online so you know that was if i had listened to a couple of the local managers they thought that the product wouldn’t work and they thought that it was the wrong idea and i should spend my money on buying another property but you know what i love about this granny flat strategy and i was explaining to someone the other night on a strategy session was this concept of you could go out and spend $300,000 and go get a property that gives you 300 bucks a week in rent but you could also go spend the same 300,000 $120,000 sorry and you didn’t know your numbers wrong go spend 120,000 bucks and get your 300 bucks a week that way and why that’s important is because for most of us that don’t aren’t earning huge money the reality is that extra $200,000 that you’ve got to pay off on the debt yeah from buying the more expensive property rather than the cheaper one is you know years and years of your after tax income that you have to pay off to get the same rent return and that’s why you know this strategy is absolute gold for me

Ryan 4:02
yeah and why because you can purchase the house and then build the granny flat obviously if you’re paying 120,000 getting 310 per week rent that is very heavily positively geared on that investment you can get construction loans to build granny flats as well so you will need to put down a deposit of somewhere around 20 to 30% speak to a mortgage broker about that one so you putting down somewhere around you know 24 to you know maybe up to $40,000 for the build and then financing the rest but definitely going to be in positive cashflow position and what we’re saying for a lot of clients and a lot of investors is that the front house if you purchase it and rent it out it’s going to be negatively geared if you then go ahead and build the granny flat then combined you end up in a cash flow neutral or cashflow positive situation where the two tenants are getting two incomes coming in are actually more than paying for the expenses on the property giving you a bit leftover which you can then use to put in your offset account build up a buffer fund pay off your mortgage Whatever it is you decide to do with it. So in terms of the numbers, we don’t have calculators on us to get full nitty gritty, I have done a video on, you know, how long would it take to pay off a granny flat using just the rental income, where I went through all the numbers. I’ll link out to that one down below. But it’s really cool to say, it’s really cool to see people start to implement this. And we’re just chillin on the deck here. And this feels so nice, super, like, I just want to be done for the day, I just want to be here with a beer or a coffee or something like that. And yeah, it’s just really cool to see this such a good return on investment, if you do it correctly. And if you do it in the right area, and as you’ll see with this property, it is fully fenced off from the front property, it’s also got its own meters and water and things like that. So it’s four separate leases were two leases on this property, which also maybe not going to affect your return on investment. But you’ve got that security of two incomes. So if the granny flat is empty tenants move out for a couple of weeks, you still got the rent from the front house, or vice versa, if the front house goes empty, you still got some money from the granny flat to ease your cash flow. And cash flow is so important when you’re investing in probably something like cash flow management is something that we don’t really talk a lot about. But having money coming in just helps you pay the bills and helps you stay afloat

Ben 6:21
massively takes the pressure off, if you get to a situation in your life, which ultimately happens to most of us where you know, you lose a job, or you you know, lose your ability to earn income for a period of time where you lose a partner, you know, so properties that pay for themselves, to me make so much more sense. You know, it’s when I started investing 10 years ago and didn’t really understand this stuff, I was kind of open to just buying anything. And you know, the number of properties would sort of be the goal. But these days, it’s about the quality of the assets, you know, how far in the green they are, and, you know, ultimately how much passive income they can create for me in the future. So I love this strategy, it’s very simple to execute. It’s, you know, a little bit outside of the box, but it’s still within a box that people can understand and, you know, quite an affordable way to create great income stream in the future.

Ryan 7:08
And for a lot of clients, the way that they’re implementing this strategy is to do exactly what’s been done here, which is to purchase a house build a granny flat, getting that positive cash flow position. And then the long term goal is to actually use that rental income to pay down the mortgage, pay off the mortgage as quickly as possible, and then own this house and granny flat completely outright, no bank loan at all. And then all that income coming in just goes into your back pocket that you can then use to live off. And so that’s the goal. That’s what we call the to property to financial freedom strategy. If you want to learn more about that. Or if you want to learn more about this strategy and how it can apply to you, then Ben and the team over Pumped on Property to offer free strategy sessions. So you can jump on the phone with them. talk more about this strategy, talk more about your situation, and how property investing may work for you. And you can then take that strategy, go ahead and apply it yourself. Or if you decide to work with Pantone property, they can help you implement this strategy as well. What you do is up to you go to onproperty. com. au forward slash session to check that out. And I will just give you a we have done walkthroughs but I’ll give you a little walkthrough in this video. So right now we’re standing out on the deck which I am in love with, we have a walkable side access for this property. So parking is on the street. And then as we walk into the property here, we can see the lounge room around here for a very an onto a very decent sized kitchen here with a really good sized pantry as well for fitting in lots of food, depending on how hungry you are. And then what I really liked about this design is that the bedrooms are split out the previous walkthrough that I’ve done, the bedrooms were right next to each other. I know as an adult, you know, just being slightly removed from my kids, I love being close to them by just sleeping slightly removed, or if two single adults were living together, they’re not right on top of each other. So we’ve got one bedroom over here, which is quite a good size, maybe 3.5 by 3.5. And then we’ve got a really good sized bathroom as well with the van, the toilet and shower. And then also room in the corner here for a washing machine. And you can also stack a dryer on top of the washing machine if you want. And then through lastly to the master bedroom. Sorry, sorry then say later. This bedroom is a really good size. So if I walk into the corner, you can see there’s room here for a bed and then room over there for a while for me it would be an office. What would you do with that space then?

Ben 9:39
Man, I don’t even know you said a sitting chair. That sounds pretty cool to do a little bit of writing on something like that

Ryan 9:44
probably just chunk up. No, no, no, what Ben would do, he would just leave that space empty he would put down a yoga mat.

Ben 9:51
That is exactly what

Ryan 9:52
I’m doing here in the morning sun doing his yoga. So we’re also gonna build teams in both bedrooms as well. So as you can see this is a really nice i like to call granny flats two bedroom units with a backyard because as you can say like this would be a really actually really spacious two bedroom unit really nice finish as well not super primo but but really nice perfect for the current

Ben 10:15
marketplace because the reality is if you’re going to enter product long term this is something that i’ve learned the hard way over capitalizing the realities in 15 years time you don’t have to repaint you’re probably going to want to update the kitchen and the bathroom so doing a product that perfectly works for today but you’re not spending an extra $30,000 pimping it out knowing that that’s just appreciating and in the future you can have to do it again

Ryan 10:39
yeah so really cool granny flat really great way to make extra income from your property again if you want the free strategy session go to onproperty com au forward slash session check that out otherwise until next time we are out of here stay positive

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